Global perspective on retail : Online retailing

Just as the internet has transformed how we communicate and share, it is now transforming how we work, how we play and, of course, how we shop.

Whether a retailer or property owner, this is a clear threat to those who cannot adapt, but it is also a source of great opportunity, opening up new markets and speeding the globalization of retail.

While a worldwide phenomenon, online retail is not the same in all areas, however. Local, cultural, regulatory and infrastructure issues that impact on physical retailing also affect the virtual world, and hence – even online – retailing can be a very local business.

According to our analysis, the UK is currently the most developed online market, followed by the USA, Germany, France, the Netherlands, South Korea, Japan and then Switzerland and the Nordic markets.

While this list is dominated by mature markets, thanks to the differing cultural and technology drivers, online retailing will change the global geography of retail, with some emerging markets set to advance more rapidly. Asian markets in particular will gain as mobile phones become more important in retailing.

In terms of property implications, some retailers are opting for fewer, larger stores, while others are seeking more but smaller stores. Clearly, there is as yet no right answer on the optimum store network, and needs will continue to evolve as retailers experiment – and landlords must adapt to that.

A contraction of the prime pitch is likely in many shopping centres and high streets, but there is clearly a major role for physical stores to play for brands, luxury and flagships, and the value proposition for the best space will rise.

The growth of “click and collect,” as well as showrooming, also underlines the ongoing importance of physical stores in the supply chain. Conversely, the increasing emphasis on logistics highlights how value is changing, and this will also be reflected in property demand and pricing.

Online trading will add to retailer costs and feed down to property. While in-demand locations will see rents rise, weaker locations, serving more as collection and storage nodes, will see rents fall.

Although negative for parts of the property market, large regional shopping centres and core in-town markets have considerable potential to emerge as winners from multi channel retailing. They tend to be areas of high traffic, with a confluence of transport links and parking and are key hubs for consumers to meet, enjoy experiences and access supporting uses such as leisure and food.

Indeed, with scope for managers to offer new services such as delivery, shopping centres should be a vital part of the e-tail infrastructure platform.